By Daniel de Vise
Washington Post Staff Writer
Thursday, January 28, 2010; 12:16 AM
College endowments suffered their worst losses since the Great Depression in the past fiscal year, dropping nearly one-fifth in value, according to the first definitive survey to track the effect of the economic downturn on the collegiate investment funds.
Many of America's wealthiest universities lost billions in endowment value in the closing months of 2008; at one point, researchers said, the average endowment was down 24 percent. The funds recovered some value in 2009, but the losses set off a wave of austerity measures across higher education.
"This is the worst year we've ever recorded," said Matthew Hamill, senior vice president of the National Association of College and University Business Officers in the District. The association released its annual survey Thursday along with the Connecticut nonprofit group Commonfund.
The average endowment lost 19 percent of its value in the fiscal year that ended June 30. The funds hadn't lost more than 11 percent in any fiscal year since the survey began in 1971. The only comparable period, researchers said, is fiscal 1932, at the depth of the Depression.
Industry leaders stressed how well most colleges weathered the downturn. Among 842 institutions surveyed, the average school spent 4.4 percent of its endowment in fiscal 2009, a spending rate comparable to past years. Half of all schools spent more endowment dollars than they had in the previous year.
That means the key missions supported by endowments -- student financial aid and faculty salaries -- went on largely unabated. Many universities boosted their aid budgets to meet the rising financial needs of their students.
To make ends meet, universities found other ways to cut spending or raised money from private donors.
The losses caused "an enormous drop of revenue that can either force spending cuts or an alarmed effort to raise funds," said Terry Hartle, senior vice president of the District-based American Council on Education, representing college presidents.
Many colleges turned to "one-time savings," Hartle said, in hopes the economy would eventually improve. "They defer maintenance. They delay the launch of initiatives. The risk is, you can't do this forever."
Among Washington region schools, the University of Virginia's endowment declined 23 percent, to $2.6 billion, and Johns Hopkins University's endowment fell 22 percent to $2 billion. Georgetown University's endowment lost 17 percent of its value, ending the fiscal year at $883 million. The fund has since recovered to $957 million.
Georgetown is far less dependent on its endowment than Harvard or Yale universities, which have the largest endowments among U.S. colleges, funding only 6 percent of its operating costs with endowment dollars.
Nonetheless, the university took several steps to compensate for the decline: delaying faculty and staff salary increases for several months and slowing the pace of all campus construction projects as the school launched a $500 million fundraising effort to fund need-based aid, dubbed the 1789 Scholarship Imperative.
The more endowment-dependent Harvard lost 30 percent of its $37 billion endowment in the past fiscal year, prompting budget reductions and a delay in the construction of a signature $1 billion science complex. Yale lost 29 percent of its $23 billion endowment, prompting salary cuts and construction delays.